Are Stocks Just Too Cheap To Pass Up?

Both the Dow and S&P staged comebacks on Wednesday; paring losses and ultimately closing in the green.

Momentum in the market turned positive after the S&P slipped down to 1040, a key technical level – and then bounced higher.

At 1040 buyers entered the market on a belief that this former level of support would hold again and provide a floor for stocks.

Short covering added to the upward momentum, as investors who held short positions covered their bets to lock in profits after the recent slump.

How should you position now?

Instant Insight with the Fast Money traders

This market is unbelievably technical, says Tim Seymour. Below 1040 I don’t see much support and quite frankly that’s where I think stocks are going.

There’s no denying that the market is still facing headwinds, explains Joe Terranova. Jobless claims and GDP could both present challenges. However it’s bullish to see tech performing as well as it did. That kind of leadership is compelling.

I think one of the biggest problems with this market has been the albatross of financials and housing, adds Steve Cortes. But both bounced substantially over the last two days and that’s constructive. That frees the market to bring other stocks higher-- stocks that I think belong higher such as BHP and Cypress .

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TOPPING THE TAPE: HOMEBUILDERS

Again, chatter on the Street suggests that homebuilders have finally bottomed. But this time the traders think there could be something too it.

The Homebuilders ETF closed higher despite new info that showed sales of new homes dropped to their lowest level since the government started tracking the numbers more than four decades ago.

What should you make of it?

Home sales are absolutely terrible, says Tim Seymour, but I don't see how they can get much worse. If you’re a value player I think you can take a shot in this space. Personally, I’d take a look at Cemex.

If you believe in a housing recovery, I’d play it with long positions in Armstrong and AO Smith, says Joe Terranova.

I’d rather own Lowe’s than any homebuilder, says Pete Najarian. .

If the government boosted the real estate market with tax incentive once before - why can't they can do it again, muses Brian Kelly of the Halftime Report.

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UNUSUAL ACTIVITY: OIL EXPLORATION

Pete Najarian has spotted unusual options activity in MMR.

With a larger than usual volume of September 11 through 15 calls trading it suggests to Najarian the stock could make a sharp move higher.

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CHART OF THE DAY: OIL BOUNCES

The traders are keeping a close eye on crude oil which had been drifting lower for weeks but then bounced off $70 – a level of past support.

What’s the trade?

The oil market appears to be challenged right now due to rising inventories, explains Joe Terranova. But I think there’s a floor in crude because of all the geo-political issues. I don’t expect oil to drop much lower than $65. I’d play it long integrated names such as BP, Suncor , or Occidental . In the space, I also like longChevron, Hess and Anadarko .

I wouldn’t short oil that’s for sure, says Tim Seymour. With so much geo-political tension it could spike at any time.

The action in gold has certainly been noteworthy. The precious metal rose on Tuesday to an eight-week high above $1,240 an ounce.

The trend in gold has been higher since it hit a low at $1,160 on July 18.

Gold 7-Week High

A look at why investors should hold onto gold, with Dennis Gartman, The Gartman Letter.

In fact, gold is about $20 below its all-time high of $1,264.90 set on June 21.

What’s the take away?

It seems to me that gold is becoming the 3rd reservable currency, says Dennis Gartman. (The dollar being number one and euro being number two.) I’d say 30% of the price move in gold is predicated on geo-political risks.

Elsewhere in metals, I find it interesting that silver has been performing so well, says Dennis Gartman. That’s something to watch though not necessarily something to get excited about.

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For Joe TerranovaTerranova is chief market strategist of Virtus Investment Partners, LTD.Virtus Investment Partners own more than 1% of (ABAX)Virtus Investment Partners own more than 1% of (ALK)Virtus Investment Partners own more than 1% of (AMKR)Virtus Investment Partners own more than 1% of (CASS)Virtus Investment Partners own more than 1% of (CSVI)Virtus Investment Partners own more than 1% of (XLY)Virtus Investment Partners own more than 1% of (XLP)Virtus Investment Partners own more than 1% of (DRYS)Virtus Investment Partners own more than 1% of (EXR)Virtus Investment Partners own more than 1% of (XLI)Virtus Investment Partners own more than 1% of (IGE)Virtus Investment Partners own more than 1% of (LDR)Virtus Investment Partners own more than 1% of (LPHI)Virtus Investment Partners own more than 1% of (XLB)Virtus Investment Partners own more than 1% of (MGRC)Virtus Investment Partners own more than 1% of (NRCI)Virtus Investment Partners own more than 1% of (DBV)Virtus Investment Partners own more than 1% of (SUBK)Virtus Investment Partners own more than 1% of (XLK)Virtus Investment Partners own more than 1% of (XLU)Virtus Investment Partners own more than 1% of (WDFC)Virtus Investment Partners own more than 1% of (YDNT)

For Brian KellyAccounts managed by Kanundrum Capital own (GDXJ)Accounts managed by Kanundrum Capital own (GLD)Accounts managed by Kanundrum Capital own (SLV)Accounts managed by Kanundrum Capital own U.S. DollarAccounts managed by Kanundrum Capital own (TBT)Accounts managed by Kanundrum Capital own (ANDE)Accounts managed by Kanundrum Capital own Swiss FrancAccounts managed by Kanundrum Capital are short (XLF)Accounts managed by Kanundrum Capital are short (IAI)Accounts managed by Kanundrum Capital are short (RSX)Accounts managed by Kanundrum Capital are short (AFL)Accounts managed by Kanundrum Capital are short (MCO)Accounts managed by Kanundrum Capital are short Mexican PesoAccounts managed by Kanundrum Capital are short U.K. PoundAccounts managed by Kanundrum Capital are short Australian DollarAccounts managed by Kanundrum Capital are short (RTH)

For Dennis GartmanFunds managed by Gartman own GoldFunds managed by Gartman is short the Euro